Vodafone bid backlash

Germany's Chancellor has delivered a 'hands off our industry' warning to British business.

Gerhard Schroeder declared there must be 'restrictions' to stop the unprecedented £79billion takeover bid by Britain's Vodafone for the century-old group Mannesmann.

Ill-feeling over the bending of European rules is already running high over France's illegal ban on British beef. Herr Schroeder did nothing to ease those tensions when he openly admitted he favoured French companies. 'I much prefer Franco-German cooperation because it is friendly,' he said.

The EU single market is supposed to provide for free trading and business within the 15 EU countries.

Herr Schroeder's intervention is a rebuff to those who believe the economies of Germany and France are ready to embrace the less regulated capitalism of Britain and the U.S.

He condemned the Vodafone bid --the first attempt at a hostile takeover of a big German firm - in an interview with the Paris newspaper Le Monde. He claimed such bids damaged 'corporate culture'.

'I urge the utmost possible caution on those who want to launch these sorts of ventures,' he added.

The remarks - made amid a furore in the German press at the presumption of the British company - are the strongest indicator that politicians are trying to use old-fashioned methods of intervention to prevent British businesses from taking a stake in the German economy.

British industry regards hostile takeovers as necessary to allow efficient and aggressive companies to grow and ensure that weak managements do not keep control of failing businesses. The bid is the biggest ever corporate takeover attempt. Vodafone is the world's largest mobile phone business and wants to get hold of the highly successful telecommunications operation launched in recent years by Mannesmann.

It wants to sell off Mannesmann's old steel factories, however, which employ four out of five of the company's 130,000 workers.

The bid has provoked fear and anger among the powerful German unions. Few outsiders have tried to take control of German companies, which are heavily protected from predators by rules limiting the size of shareholdings and others insisting there can be no takeover without the backing of 75% of shareholders.

Further laws allow individual shareholders to go to court to block takeovers and allow political interests to slow bids through devices such as putting union representatives on company boards.

German companies, however, frequently take over foreign concerns. BMW bought Rover five years ago. Herr Schroeder himself was deeply involved in the takeover of Rolls Royce by BMW and Volkswagen this year.

The Chancellor is under pressure from his own left-wing to halt the Vodafone takeover.

Analysts believe Vodafone's bid has every chance of success. If it fails, however, it is thought to be vulnerable to large U.S. firms that may try to launch similarly huge bids for Vodafone.